• Significant Growth: Afdis reported a 51% increase in turnover to US$19 million largely due to government anti-smuggling efforts and a 40% rise in total volume
• Product Category Performance: The company saw notable growth in various segments
• Ready-to-Drink beverages surged by 45%, spirits by 36%, and wines by 25%, reflecting strong consumer demand
• Government Initiatives: The crackdown on smuggling and the implementation of tax reforms by the Zimbabwean government aim to formalize the economy

Harare- Afdis, Zimbabwe’s leading spirits and wine producer, has commended the government’s anti-smuggling initiatives, which have significantly boosted the company’s performance in the first quarter ending June 30, 2025.

The company reported a 40% surge in total volume compared to the previous year, fueled by strong consumer demand driven by a record tobacco harvest, a successful summer crop, and increased gold production and prices.

Afdis highlighted the government’s crackdown on smuggled goods and the ban on illicit ethanol-based cheap spirits as key factors enhancing product availability and market stability.

This resulted in a 51% increase in turnover, reaching US$19 million, with notable growth across its product categories: Ready-to-Drink (RTD) beverages rose by 45%, driven by the newly launched Hunters 660ml pack; the spirits category grew by 36%, led by brown spirits; and wines saw a 25% uptick, particularly in the affordable segment.

Zimbabwe has long grappled with a rampant informal sector and smuggling, issues that intensified during the tenure of the late President Robert Mugabe.

His administration’s policies severely undermined the formal sector, leading to widespread shop closures, retrenchments, and an unemployment rate that soared to 92%.

During the Second Republic, the government sought to curb this high level of informalisation, which was further enabled by lax border controls and an overvalued exchange rate that favoured informal traders dealing exclusively in US dollars.

These traders, benefiting from unregulated markets, significantly disrupted formal businesses, including those like Afdis, by flooding the market with untaxed, smuggled goods.

In response, the government, under Finance Minister Mthuli Ncube, has introduced stringent measures in the 2025 budget to formalise the informal sector and boost revenue collection.

Many informal traders, operating in sectors such as fabric, clothing, automotive, hardware, groceries, and kitchenware, engage in substantial economic activities and should contribute through Personal and Corporate Income Taxes, moving away from the less effective presumptive tax system.

The tax reforms introduced in Zimbabwe’s 2025 budget, spearheaded by Finance Minister Mthuli Ncube, aim to formalise the country’s dominant informal sector, enhance revenue collection, and create a more equitable economic environment.

These reforms target informal traders, who account for nearly 80% of employment in Zimbabwe, where only about 10% of the workforce is engaged in the formal sector.

Historically, the informal sector has largely evaded taxation, contributing to economic distortions and undermining formal businesses through the influx of untaxed, often smuggled goods. The reforms address these challenges by integrating informal traders into the formal tax system, improving compliance, and levelling the playing field for businesses like Afdis, which have benefited from related anti-smuggling efforts.

A key component of the reforms is the shift away from the presumptive tax system, which previously applied to informal traders but was deemed inadequate for capturing their economic contributions.

A government survey revealed that many informal operators, particularly in sectors such as fabric, clothing, automotive, hardware, groceries, and kitchenware, engage in significant economic activities.

As a result, these traders are now required to register with the Zimbabwe Revenue Authority (ZIMRA) for Personal and Corporate Income Taxes. This change ensures that their tax obligations reflect their actual earnings, aligning their contributions with those of formal businesses.

To enforce compliance, the reforms mandate that informal traders adopt Point-of-Sale (POS) machines and maintain detailed transaction records starting January 1, 2025. These requirements aim to improve transparency and track economic activity in a sector previously characterized by cash-based, undocumented transactions.

Non-compliance carries severe penalties, with fines ranging from US$9,000 to US$15,000, and ZIMRA is authorized to temporarily close businesses that fail to adhere to these regulations.

These measures not only aim to boost government revenue but also curb the competitive disadvantage faced by formal businesses, which have struggled against the informal sector’s untaxed goods and lax border controls that facilitated smuggling.

The reforms are part of a broader effort to address Zimbabwe’s economic challenges, including high informalisation and weak fiscal inflows, which were exacerbated during the era of former President Robert Mugabe and persisted into the Second Republic due to an overvalued exchange rate and unregulated borders.

Latest economic census

Zimbabwe’s first-ever Economic Census, conducted by Zimstat between June 2024 and March 2025, has painted a vivid picture of an economy that thrives on informality and individual enterprise. The census, aimed at understanding the structure and size of the nation’s economic landscape, revealed that a staggering 76.1% of the 204,798 operations or “establishments” assessed are informal.

These businesses operate outside the formal frameworks of registration with key institutions like the Companies Registry, Zimra, or NSSA. The census further uncovered that micro-enterprises dominate the economic scene, making up 88% of the surveyed companies. This prevalence of small-scale operations reflects a landscape where sole traders and tiny businesses form the backbone of economic activity.

Trading emerged as the largest sector, with 73.13% of the surveyed establishments engaged in buying and selling goods. In stark contrast, manufacturing lags far behind, constituting only 8.24% of operations. This heavy reliance on trading over production suggests an economy geared more toward commerce than industrial output, potentially limiting long-term growth in value-added sectors.

Delving deeper into the manufacturing sector, the census revealed that only 19% of the 17,877 manufacturing establishments are formal. This low formalisation rate within manufacturing points to significant structural challenges, such as limited access to capital, technology, or regulatory support, which may hinder the sector’s growth and contribution to the economy.

Meanwhile, the overwhelming majority of all establishments 89.42% are owned by individuals, emphasising the critical role of sole traders in driving Zimbabwe’s economic engine. These individual entrepreneurs, often operating informally, navigate a complex environment with limited institutional backing, yet their sheer numbers demonstrate their centrality to the nation’s livelihoods.

Overall, the census findings highlight an economy powered by informal, individual-led trading, with micro-enterprises dominating and manufacturing playing a limited role.

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